By Ambar Warrick
Investing.com-- Singapore’s economy shrank more than expected in the first quarter of 2023, marking a sluggish start to the year as a slowdown in the country’s key manufacturing sector deepened, while other facets of the economy also saw slowing growth.
Singapore’s first quarter GDP rose 0.1% on an annual basis, lower than expectations for a rise of 0.6%, and much lower than 2022’s growth of 2.1%, preliminary data from the Department of Statistics showed on Friday.
On a quarterly basis, GDP shrank 0.7%, more than expectations for a decline of 0.2%.
The reading was largely driven by a pronounced slowdown in the manufacturing sector, which shrank 6% on an annual basis, and marked its second straight quarter in the red.
The sector, which is the largest driver of Singapore’s economy, is facing slowing overseas demand amid worsening economic conditions across the globe. This saw local producers sharply scale back output.
Singapore’s key non-oil exports consistently declined through the first quarter.
A sluggish recovery in major trading partner China weighed heavily on Singapore's economy, as did slowing demand for electronic components manufactured in the island state.
Still, with China having relaxed most anti-COVID restrictions, a recovery in the mainland may benefit Singapore later this year.
Singaporean businesses are also grappling with increased input costs, amid high fuel and utility prices, as well as elevated inflation.
This also spurred more monetary tightening measures by the Monetary Authority of Singapore, further stymying growth.
The decline in manufacturing largely offset growth in other sectors, with construction activity up 8.5% during the quarter on an annual basis. Services, particularly accommodation, food, and other administrative services, also rose 6.7%, although growth slowed from the prior month and was at its weakest level in a year.
Increased tourism also provided some support to the economy.